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Optimization Of Online Promotion: A Profit-Maximizing Model Integrating Price Discount And Product Recommendation

Author

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  • YUANCHUN JIANG

    (School of Management, Hefei University of Technology, Hefei, Anhui 230009, China;
    Key Laboratory of Process Optimization and Intelligent Decision-Making, Ministry of Education, Hefei, Anhui 230009, China)

  • YEZHENG LIU

    (School of Management, Hefei University of Technology, Hefei, Anhui 230009, China;
    Key Laboratory of Process Optimization and Intelligent Decision-Making, Ministry of Education, Hefei, Anhui 230009, China)

Abstract

Price promotion and product recommendation are important tactics to gain market share in the e-commerce context. To increase sales and enhance promotion profits, practitioners often recommend non-discounted products in the promotional campaign for a product. However, no analytical model is hitherto available to jointly optimize the price discount for the promoted product and the product portfolio to recommend. This paper provides a probability model to complete the task. The proposed model motivates customers through an attractive price discount for the promoted product, while simultaneously encouraging customers to purchase the non-discounted products through the recommendation system. The numerical studies show that the proposed method attains higher profits than do conventional methods. Finally, we offer managerial insights and provide useful guidelines to help e-tailers to make the most profitable online promotional decisions.

Suggested Citation

  • Yuanchun Jiang & Yezheng Liu, 2012. "Optimization Of Online Promotion: A Profit-Maximizing Model Integrating Price Discount And Product Recommendation," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 11(05), pages 961-982.
    • Handle: RePEc:wsi:ijitdm:v:11:y:2012:i:05:n:s0219622012500289
    DOI: 10.1142/S0219622012500289
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    Cited by:

    1. Yixiao Li & Zhanda Zhang & Ruiqin Wang & Yuangao Chen, 2019. "Consumer Purchase Intention toward Crowdfunding Products/Services: A Cost–Benefit Perspective," Sustainability, MDPI, vol. 11(13), pages 1-21, June.
    2. Chen, Shiuann-Shuoh & Choubey, Bhaskar & Singh, Vinay, 2021. "A neural network based price sensitive recommender model to predict customer choices based on price effect," Journal of Retailing and Consumer Services, Elsevier, vol. 61(C).
    3. Jiang, Yuanchun & Shang, Jennifer & Liu, Yezheng & May, Jerrold, 2015. "Redesigning promotion strategy for e-commerce competitiveness through pricing and recommendation," International Journal of Production Economics, Elsevier, vol. 167(C), pages 257-270.

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